Analysts at Jefferies say it’s “very likely” the U.S. Department of Justice will ban Google’s longtime search deal on iPhones, a decision Jefferies predicts could sink Apple’s stock by as much as 11%.
Google has been at the center of the biggest antitrust trial in decades, as the DOJ questions practices that have kept the search engine front and center on smartphones and web browsers. Google has paid billions to Apple and others annually to have a prominent spot on devices up until now, but Jefferies analysts on Wednesday predicted the DOJ would ban those deals in the future as it tries to break up any search monopoly. Jefferies estimates the $25 billion deal makes up 20% of Apple’s pretax profit, or about 6.3% of total revenue, representing an 8% to 11% hit on share prices.
These deals have taken place since 2002 when Google first paid Apple a cut of its search advertising revenue to make Google the default search platform. According to the Financial Times, that gave Google access to Apple’s user base, with more than half of all search queries in the U.S. today currently flowing through Apple devices.
During the trial, DOJ lawyers argued that Google’s practice of paying billions to secure its position on platforms like Apple blocks competitors and prevents innovation. Google has repeatedly countered that its dominance stems from consumer preference and users can easily switch to other search engines if they wish. However, DOJ prosecutors contend that the sheer scale of these payments reveals the lengths to which Google goes to maintain its monopoly.
Even if the DOJ does end these deals, the effects may take time to materialize. Jefferies estimates it could take three to eight years for a final outcome in court, with the possibility of long appeals. Jefferies also called its own estimates “pessimistic,” noting they are part of a model in which there is zero offset in revenue by Apple. If the case is indeed tied up for years, as Jefferies predicts, Apple has plenty of time to course-correct and make up for any potential lost revenue. Jefferies also added the impact could be contained to the U.S. only, depending on the reaction from Europe to any DOJ decision.
Representatives from Jefferies, Apple, and Google did not immediately reply to Fortune’s request for comment.
In the meantime, Apple’s stock price has remained relatively resilient, bolstered by investor optimism about upcoming products like the iPhone 17 as well as new AI-powered technologies.
Still, should the DOJ block the Google-Apple deal, it will mark a significant shift for both companies and could force Apple to explore its own search engine or deeper AI integrations—a path that carries its own risks. For Google, the stakes are equally high, if not higher. This case could fundamentally disrupt the company’s ability to use financial agreements to dominate the search-engine market.
The outcome of the case would also trigger ripple effects across the broader tech landscape, potentially opening doors for competitors such as Microsoft. As regulators around the globe keep a close eye on this case, it’s clear that both Google and Apple stand at the crossroads of a legal decision that could reshape their futures.